GM, Ford Cut Output Plans
For 4th-Quarter Production

DETROIT --
General Motors Corp.
and
Ford Motor Co.
made significant cuts in their fourth-quarter vehicle-production plans from a month ago, reflecting strikes at GM and an engine shortage at Ford.

No. 3
Chrysler Corp.
previously was planning to build 2.8% fewer cars and light trucks in North America this quarter than a year ago. An 11.4% GM cut and a 2.8% reduction by Ford from their plans a month ago mean that the Big Three combined now plan to reduce fourth-quarter output in the U.S., Mexico and Canada about 4.6% from a year ago. Their earlier plans had called for a combined 1.4% increase in output.

The lower vehicle production by the Big Three isn't expected to have a significant impact on the U.S. economy. The production decline at the auto makers' U.S. assembly factories will amount to about 3.9%, and much of the production is likely to be made up later. The biggest percentage reduction in fourth-quarter output plans is in Canadian assembly plants, where GM's factories sustained a 20-day strike in October. Because vehicle and vehicle-parts production in the U.S., Mexico and Canada is so closely integrated, it is difficult to assess the economic impact of assembly cuts alone on any single economy.

Lower Earnings Estimates

Wall Street analysts lowered their fourth-quarter earnings estimates for both GM and Ford. Jack Kirnan of Salomon Brothers, for example, said he lowered his GM estimate to $1 a share from $1.85. "It's strictly related to the work stoppages in Canada and the U.S.," said Mr. Kirnan, who still rates GM's stock a "buy."

Stephen Girsky of Morgan Stanley reduced his fourth-quarter estimate for GM to $1.20 a share from $1.55; he previously lowered his estimate after the strike in Canada. Mr. Girsky also lowered his fourth-quarter estimate for Ford, to $1 a share from $1.20, before an expected charge of 40 cents a share for an early retirement program and restructuring.

In composite trading on the New York Stock Exchange, GM shares fell 50 cents to $55; while Ford shares were unchanged at $31.625, and Chrysler shares were unchanged at $32.75.

Possible Softness

Even though GM's reduced output plans reflect the company's strikes in both Canada and the U.S., its rivals' failure to take up the slack by producing more vehicles indicates that the auto makers see softness in the vehicle market, argued David Littmann, senior economist of Detroit's Comerica Bank. "The auto companies are making sure they won't be stuck with too much inventory if sales slow," Mr. Littmann said. "It's a recognition of where we are in the cycle; consumers are definitely slowing down." Mr. Littmann expects 1997 U.S. light-vehicle sales to decline about 1.3% to 14.9 million cars and trucks from this year's expected 15.1 million.

However, rejoined Van Bussmann, chief economist of Chrysler, that doesn't amount to a very significant softening. Mr. Bussmann acknowledged that there has been some slowing of sales in the fourth quarter and that it may continue into the first quarter of next year. But he maintained that the new-vehicle market remains healthy, and there are no signs of a steep sales decline. Although the No. 3 auto maker hasn't formulated its 1997 forecast yet, Mr. Bussmann said he expects sales to decline less than 1% from this year.

GM said it cut fourth-quarter production plans in North America by 151,000 cars and light trucks to 1,169,000 vehicles. Earlier, it had planned to match last year's production of 1,320,000 units. The company attributed the reduction to the work stoppages imposed by striking members of the Canadian Auto Workers and the United Auto Workers. After the 20-day Canadian walkout had been settled, GM sustained UAW strikes at its truck plant in Janesville, Wis., and at a key stamping plant in Indianapolis, which forced brief stoppages at a few other truck plants.

Ford's Reduction

No. 2 Ford said it reduced its fourth-quarter production plan nearly 30,000 vehicles, or 2.8%, from its schedule a month ago. Ford now plans to build 1,045,000 cars and light trucks in North America, up 3.2% from a year earlier. The reductions include 19,000 cars and 10,000 trucks in U.S. assembly plants. A spokesman attributed the reductions to a shortage of V-8 engines, which has resulted in temporary closings of several plants in the past few weeks.

The Ford spokesman said, "We simply didn't ramp up production fast enough" of a new line of V-8 engines that go into a broad array of Ford cars and trucks. The hot demand for the bigger engines, which generally go into more expensive vehicles, tends to support industry economists' contention that signs of serious softening in the vehicle market are missing.

Chrysler a month ago set fourth-quarter North American production at 666,300 cars and light trucks, 2.8% fewer than a year ago, chiefly reflecting a plant closing for new-model conversion. The company said it plans to report its revised fourth-quarter schedule later this week.